UK regulator the Financial Services Authority could ask for greater disclosure from hedge funds, according to the head of its first dedicated hedge fund manager supervision team.
On November 1, just 24 hours into his new job, Andrew Shrimpton told an audience at London law firm Berwin Leighton Paisner that the FSA was “not asking for position data”, although he added that the hedge fund industry was increasingly willing to disclose positions.
Shrimpton said that although “managers are understandably reluctant to disclose their positions to the market and therefore to the competition, increasingly they’re willing to disclose positions to investors and counterparties”.
Shrimpton’s team will be in regular contact with 35 of London’s larger hedge fund managers, and will also lead thematic projects looking at the hedge fund sector as a whole.
“We are thinking about asking for additional data, firstly to decide with more accuracy whether managers should be relationship managed, and, secondly, to make thematic supervision more effective,” said Shrimpton.
The FSA published its risk assessment of the hedge fund sector in its discussion paper in June. It warned of market disruption if hedge funds with large, concentrated exposures failed. It outlined a new data collection policy that would involve hedge fund managers reporting strategies, value of assets under management, gross long and short exposures, P&L volatility, and the returns, fees and commissions of each of their funds. The deadline for responses was the final Friday in October.
“The firms that are relationship managed will change over time and go up in number,” said Shrimpton, who also warned that the industry should think about how to report leverage. “We are not aware of any UK-managed hedge fund that has gross long or short positions anything like LTCM,” he said. “But we’re not sure if there is any easy way to measure leverage in positions.”
